Can SP500 Index Close Fall Outside of Intra-Day Trading Range?

M

martingale

On certain days, the SP500 index close level for the day would fall outside of range of the SP500 index levels published during the day, based on the data I have.

Examples:
6/25/04: Daily close = 1134.43. Market never traded that low. (Intra-day at around 1137.)
9/29/08: Daily close = 1106.42. Market never traded that low. (Intra-day at around 1110.)
7/2/09: Daily close = 896.42. Market never traded that low. (Intra-day at around 898.)

Data Sources:
Daily Closes: Bloomberg and SP official website.
Intra-day ticks: TickData Inc.

I am wondering if 1) I have data error from one of my data sources, or 2) maybe this is just the reality -- i.e. index close is based on primary exchange closing auctions on the component stocks (and maybe some big sellers were relying on the close auctions to get more done instead of hitting the higher bids before 4pm)?

Hope someone familiar with the closing auctions can shed some light. Thanks.
 
You say "market never traded that low". The "on-market" includes all trades reported to the tape including the opening and closing price auctions.

Note that the official close can be somewhat after 4pm so this is where you have an an error in your definition.

PS - The index opens are a joke with the staggered opening of the market and the multiple exchange trading capability. eg. NYSE stocks can take minutes to open, but happily trade on other markets on-market from 9:30:00.000. i.e. do not trust index opening values. They are not indicative of actual market activity.
 
Thanks, Mr. Harmon.

I guess I should rephrase to be more precise: SPX index closed on 9/29/08 at 1106.42. This means that people left limit-on-close sell orders on the component stocks at levels collectively led to the SPX being at 1106.42. The puzzling thing is that at 15 minutes before close (when they could still pull their LOC orders), the SPX index was trading at 1130+ (see below). In order words, some of the component stocks at that time were trading at levels much higher than some of the limit prices of the standing LOC orders on such component stocks. But why wouldn't these people just pull the LOC and hit the bids on such component stocks? Was the market really that thin that one was willing to give up 24 points to trade size? (Or people thought they could get filled in the closing auctions at levels much better than their limit prices given the one-price Dutch auction nature of the closes?)

(Of course, SPX intra-day prints for the first 5 minutes or so, including opne, are meaningless. One should use Emini or SOQ instead.)

SPX intra-day trades (chicago times)
09/29/2008,14:44:36,1134.31
09/29/2008,14:44:51,1134.14
09/29/2008,14:45:06,1133.99
09/29/2008,14:45:21,1133.87
09/29/2008,14:45:36,1132.86
09/29/2008,14:45:51,1131.1
09/29/2008,14:46:06,1130.66
09/29/2008,14:46:21,1131.48
09/29/2008,14:46:36,1131.83
09/29/2008,14:46:51,1132.12
09/29/2008,14:47:06,1130.78
09/29/2008,14:47:21,1130.26
09/29/2008,14:47:36,1129.98
09/29/2008,14:47:51,1128.49
09/29/2008,14:48:06,1128.05
09/29/2008,14:48:21,1128.21
09/29/2008,14:48:36,1128.6
09/29/2008,14:48:51,1128.8
 
I don't understand your issue.

The closing price auctions vary from intraday levels. There are far more "people" trading than you can ever imagine. Think hedge funds rebalancing, arb traders against options and futures, overseas funds with large redemptions etc.

Wait until you trade futures and see limit down markets to make your day "fun"!
 
martingale said:
Thanks, Mr. Harmon.

I guess I should rephrase to be more precise: SPX index closed on 9/29/08 at 1106.42. This means that people left limit-on-close sell orders on the component stocks at levels collectively led to the SPX being at 1106.42. The puzzling thing is that at 15 minutes before close (when they could still pull their LOC orders), the SPX index was trading at 1130+ (see below). In order words, some of the component stocks at that time were trading at levels much higher than some of the limit prices of the standing LOC orders on such component stocks. But why wouldn't these people just pull the LOC and hit the bids on such component stocks? Was the market really that thin that one was willing to give up 24 points to trade size? (Or people thought they could get filled in the closing auctions at levels much better than their limit prices given the one-price Dutch auction nature of the closes?)

(Of course, SPX intra-day prints for the first 5 minutes or so, including opne, are meaningless. One should use Emini or SOQ instead.)

SPX intra-day trades (chicago times)
09/29/2008,14:44:36,1134.31
09/29/2008,14:44:51,1134.14
09/29/2008,14:45:06,1133.99
09/29/2008,14:45:21,1133.87
09/29/2008,14:45:36,1132.86
09/29/2008,14:45:51,1131.1
09/29/2008,14:46:06,1130.66
09/29/2008,14:46:21,1131.48
09/29/2008,14:46:36,1131.83
09/29/2008,14:46:51,1132.12
09/29/2008,14:47:06,1130.78
09/29/2008,14:47:21,1130.26
09/29/2008,14:47:36,1129.98
09/29/2008,14:47:51,1128.49
09/29/2008,14:48:06,1128.05
09/29/2008,14:48:21,1128.21
09/29/2008,14:48:36,1128.6
09/29/2008,14:48:51,1128.8
More...

During that time in 2008, markets were so volatile into the close. Short selling was banned and everyone had to rebalance their risks. Given the volatility, many traders' risks got large and often unpredictable. It wouldn't surprise me at all that the official close would be 2% lower than the prints before that - especially as your are going into a quarter end where the Fed just pulled the rug from under the market.
 
Everything you gents mentioned is true. But none could answered this question: At 3:45pm NYC time, why did people leave LOC sell order at a limit price 2-3% less than the prevailing trading price? But not just hit the bid?

I know it was a very huge down day and so forth, but the question remains nevertheless.

(I guess what NewWurldmn meant was that everything was magnified 10x on that day, including trader's sense of acceptable loss of certain actions. So leaving a 2-3% off market LOC on that day was like leaving a 0.2% off market LOC on a normal day -- off market enough to ensure a fill with a hope that auction would clear above the 3:45pm prevailing price by maybe 1-2%. I cannot think of any better explanation than this either.)
 
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martingale said:
Everything you gents mentioned is true. But none could answered this question: At 3:45pm NYC time, why did people leave LOC sell order at a limit price 2-3% less than the prevailing trading price? But not just hit the bid?

I know it was a very huge down day and so forth, but the question remains nevertheless.

(I guess what NewWurldmn meant was that everything was magnified 10x on that day, including trader's sense of acceptable loss of certain actions. So leaving a 2-3% off market LOC on that day was like leaving a 0.2% off market LOC on a normal day -- off market enough to ensure a fill with a hope that auction would clear above the 3:45pm prevailing price by maybe 1-2%. I cannot think of any better explanation than this either.)
More...

Yeah. They were crazy times. We made millions trading into the close. It was as if the whole market was short 10billion dollars of gamma.

Btw more likely they were market on close. Vanguard mutual funds get 500mm of redemptions and they have to sell and match the performance of the index.
 
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